World Bank says Latin American economies have failed to compete on the global scale

Latin American and Caribbean countries are facing a serious long-term effort to maintain economic growth with an important social component, due to the lack of infrastructure and qualified labor.

In a report, the World Bank indicated that the majority of the countries in the area have stronger macro-economic conditions due to political changes that have been adopted in response to the crisis of the last decades. The same cannot be said for their business practices.

According to the report, “Latin America and the Ascension of the South,” as the global economy has changed irreversibly, the countries of the region have been able to adjust to the economic problems, commercial as well as financial.

The adjustment process has been conditioned by the restructuring that the region has enacted on these two fronts and this is reflected in the patterns of change.

Important challenges have surfaced due to the fact that the changes do not appear to have improved the long-range economic growth outlook in the region, the report stated.

The priorities of the economic policies of the region have evolved in response to the global changes which have exacerbated certain difficulties in the region, such as the dependency on minerals and the comparatively low interest rates.

Map of Latin America (Google)

The World Bank expects the debate over the priority in public policy, which has as a central focus growth in the region, will probably intensify.

Augusto de la Torre, chief economist for Latin America and the Caribbean at the World Bank, said that the last round of boom growth had positive implications for the region but was not taken advantage of by the countries of the region.

The difference between countries in Asia and Latin America and the Caribbean is that the latter did not know how to apply the benefits from the economic bonanza to improve business relations, such as direct investments.

“In order to grow, it is not only important to have international business, not only to receive direct foreign investment, because in order to grow it is important how much you learn and how much you can develop your technological capacity through business exchange and direct foreign investment,” he said.

The report also found that the region has not known how to incorporate itself wholly to global value chains, like the Asian nations have, because the bulk of the region’s exports are raw materials or that they incorporate themselves at the final phase of the production chain, De la Torre said.

“Their ability to incorporate themselves into the global economy cannot by solely dependent on their raw materials. They will have to have to depend on a highly skilled labor force,” he said.

The report offered the leaders of the region recommendations centered on improving the work force and the infrastructure, as well as the technology capacity and the business climate.

De la Torre believes that it is necessary to equip the labor market with more economic flexibility so that the workers can move to more productive sectors.